Professional Documents
Culture Documents
Business Plan For A Startup Business
Business Plan For A Startup Business
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Business Plan
OWNERS
YourBusinessName
AddressLine1
AddressLine2
City,STZIPCode
Telephone
Fax
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I.
TableofContents
I.
TableofContents ................................................................................................... 3
II.
ExecutiveSummary............................................................................................... 4
III.
GeneralCompanyDescription ............................................................................ 5
IV.
ProductsandServices............................................................................................ 6
V.
MarketingPlan ....................................................................................................... 7
VI.
OperationalPlan .................................................................................................. 16
StartupExpensesandCapitalization ................................................................ 23
X.
FinancialPlan ....................................................................................................... 24
XI.
Appendices ........................................................................................................... 27
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II.
ExecutiveSummary
Writethissectionlast.
Wesuggestthatyoumakeittwopagesorfewer.
Includeeverythingthatyouwouldcoverinafiveminuteinterview.
Explainthefundamentalsoftheproposedbusiness:Whatwillyourproductbe?Who
willyourcustomersbe?Whoaretheowners?Whatdoyouthinkthefutureholdsfor
yourbusinessandyourindustry?
Makeitenthusiastic,professional,complete,andconcise.
Ifapplyingforaloan,stateclearlyhowmuchyouwant,preciselyhowyouaregoingto
useit,andhowthemoneywillmakeyourbusinessmoreprofitable,therebyensuring
repayment.
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III.
GeneralCompanyDescription
Whatbusinesswillyoubein?Whatwillyoudo?
MissionStatement:Manycompanieshaveabriefmissionstatement,usuallyin30
wordsorfewer,explainingtheirreasonforbeingandtheirguidingprinciples.Ifyou
wanttodraftamissionstatement,thisisagoodplacetoputitintheplan,followedby:
CompanyGoalsandObjectives:Goalsaredestinationswhereyouwantyourbusiness
tobe.Objectivesareprogressmarkersalongthewaytogoalachievement.Forexample,
agoalmightbetohaveahealthy,successfulcompanythatisaleaderincustomer
serviceandthathasaloyalcustomerfollowing.Objectivesmightbeannualsalestargets
andsomespecificmeasuresofcustomersatisfaction.
BusinessPhilosophy:Whatisimportanttoyouinbusiness?
Towhomwillyoumarketyourproducts?(Stateitbrieflyhereyouwilldoamore
thoroughexplanationintheMarketingPlansection).
Describeyourindustry.Isitagrowthindustry?Whatchangesdoyouforeseeinthe
industry,shorttermandlongterm?Howwillyourcompanybepoisedtotake
advantageofthem?
Describeyourmostimportantcompanystrengthsandcorecompetencies.Whatfactors
willmakethecompanysucceed?Whatdoyouthinkyourmajorcompetitivestrengths
willbe?Whatbackgroundexperience,skills,andstrengthsdoyoupersonallybringto
thisnewventure?
Legalformofownership:Soleproprietor,Partnership,Corporation,Limitedliability
corporation(LLC)?Whyhaveyouselectedthisform?
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IV.
ProductsandServices
Describeindepthyourproductsorservices(technicalspecifications,drawings,photos,
salesbrochures,andotherbulkyitemsbelonginAppendices).
Whatfactorswillgiveyoucompetitiveadvantagesordisadvantages?Examplesinclude
levelofqualityoruniqueorproprietaryfeatures.
Whatarethepricing,fee,orleasingstructuresofyourproductsorservices?
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V.
MarketingPlan
Economics
Factsaboutyourindustry:
Whatisthetotalsizeofyourmarket?
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Whatpercentshareofthemarketwillyouhave?(Thisisimportantonlyifyou
thinkyouwillbeamajorfactorinthemarket.)
Currentdemandintargetmarket.
Trendsintargetmarketgrowthtrends,trendsinconsumerpreferences,and
trendsinproductdevelopment.
Growthpotentialandopportunityforabusinessofyoursize.
Whatbarrierstoentrydoyoufaceinenteringthismarketwithyournew
company?Sometypicalbarriersare:
o Highcapitalcosts
o Highproductioncosts
o Highmarketingcosts
o Consumeracceptanceandbrandrecognition
o Trainingandskills
o Uniquetechnologyandpatents
o Unions
o Shippingcosts
o Tariffbarriersandquotas
Andofcourse,howwillyouovercomethebarriers?
Howcouldthefollowingaffectyourcompany?
o Changeintechnology
o Changeingovernmentregulations
o Changeintheeconomy
o Changeinyourindustry
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Product
IntheProductsandServicessection,youdescribedyourproductsandservicesasyousee
them.Nowdescribethemfromyourcustomerspointofview.
FeaturesandBenefits
Listallofyourmajorproductsorservices.
Foreachproductorservice:
Describethemostimportantfeatures.Whatisspecialaboutit?
Describethebenefits.Thatis,whatwilltheproductdoforthecustomer?
Notethedifferencebetweenfeaturesandbenefits,andthinkaboutthem.Forexample,
ahousethatgivesshelterandlastsalongtimeismadewithcertainmaterialsandtoa
certaindesign;thoseareitsfeatures.Itsbenefitsincludeprideofownership,financial
security,providingforthefamily,andinclusioninaneighborhood.Youbuildfeatures
intoyourproductsothatyoucansellthebenefits.
Whataftersaleserviceswillyougive?Someexamplesaredelivery,warranty,service
contracts,support,followup,andrefundpolicy.
Customers
Identifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations,
otherwiseknownastheirdemographics.
Thedescriptionwillbecompletelydifferentdependingonwhetheryouplantosellto
otherbusinessesordirectlytoconsumers.Ifyousellaconsumerproduct,butsellit
throughachannelofdistributors,wholesalers,andretailers,youmustcarefullyanalyze
boththeendconsumerandthemiddlemanbusinessestowhichyousell.
Youmayhavemorethanonecustomergroup.Identifythemostimportantgroups.
Then,foreachcustomergroup,constructwhatiscalledademographicprofile:
Age
Gender
Location
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Incomelevel
Socialclassandoccupation
Education
Other(specifictoyourindustry)
Other(specifictoyourindustry)
Forbusinesscustomers,thedemographicfactorsmightbe:
Industry(orportionofanindustry)
Location
Sizeoffirm
Quality,technology,andpricepreferences
Other(specifictoyourindustry)
Other(specifictoyourindustry)
Competition
Whatproductsandcompanieswillcompetewithyou?
Listyourmajorcompetitors:
(Namesandaddresses)
Willtheycompetewithyouacrosstheboard,orjustforcertainproducts,certain
customers,orincertainlocations?
Willyouhaveimportantindirectcompetitors?(Forexample,videorentalstores
competewiththeaters,althoughtheyaredifferenttypesofbusinesses.)
Howwillyourproductsorservicescomparewiththecompetition?
UsetheCompetitiveAnalysistablebelowtocompareyourcompanywithyourtwo
mostimportantcompetitors.Inthefirstcolumnarekeycompetitivefactors.Sincethese
varyfromoneindustrytoanother,youmaywanttocustomizethelistoffactors.
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InthecolumnlabeledMe,statehowyouhonestlythinkyouwillstackupincustomers
minds.Thencheckwhetheryouthinkthisfactorwillbeastrengthoraweaknessfor
you.Sometimesitishardtoanalyzeourownweaknesses.Trytobeveryhonesthere.
Betteryet,getsomedisinterestedstrangerstoassessyou.Thiscanbearealeyeopener.
Andrememberthatyoucannotbeallthingstoallpeople.Infact,tryingtobecauses
manybusinessfailuresbecauseeffortsbecomescatteredanddiluted.Youwantan
honestassessmentofyourfirmsstrongandweakpoints.
Nowanalyzeeachmajorcompetitor.Inafewwords,statehowyouthinktheycompare.
Inthefinalcolumn,estimatetheimportanceofeachcompetitivefactortothecustomer.
1=critical;5=notveryimportant.
Table1:CompetitiveAnalysis
Factor
Products
Price
Quality
Selection
Service
Reliability
Stability
Expertise
Company
Reputation
Location
Appearance
Me
CompetitorB
Importanceto
Customer
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Factor
Me
SalesMethod
CreditPolicies
Advertising
Image
CompetitorB
Importanceto
Customer
Now,writeashortparagraphstatingyourcompetitiveadvantagesanddisadvantages.
Niche
Nowthatyouhavesystematicallyanalyzedyourindustry,yourproduct,your
customers,andthecompetition,youshouldhaveaclearpictureofwhereyour
companyfitsintotheworld.
Inoneshortparagraph,defineyourniche,youruniquecornerofthemarket.
Strategy
Nowoutlineamarketingstrategythatisconsistentwithyourniche.
Promotion
Howwillyougetthewordouttocustomers?
Advertising:Whatmedia,why,andhowoften?Whythismixandnotsomeother?
Haveyouidentifiedlowcostmethodstogetthemostoutofyourpromotionalbudget?
Willyouusemethodsotherthanpaidadvertising,suchastradeshows,catalogs,dealer
incentives,wordofmouth(howwillyoustimulateit?),andnetworkoffriendsor
professionals?
Whatimagedoyouwanttoproject?Howdoyouwantcustomerstoseeyou?
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Inadditiontoadvertising,whatplansdoyouhaveforgraphicimagesupport?This
includesthingslikelogodesign,cardsandletterhead,brochures,signage,andinterior
design(ifcustomerscometoyourplaceofbusiness).
Shouldyouhaveasystemtoidentifyrepeatcustomersandthensystematicallycontact
them?
PromotionalBudget
Howmuchwillyouspendontheitemslistedabove?
Beforestartup?(Thesenumberswillgointoyourstartupbudget.)
Ongoing?(Thesenumberswillgointoyouroperatingplanbudget.)
Pricing
Explainyourmethodormethodsofsettingprices.Formostsmallbusinesses,having
thelowestpriceisnotagoodpolicy.Itrobsyouofneededprofitmargin;customers
maynotcareasmuchaboutpriceasyouthink;andlargecompetitorscanunderprice
youanyway.Usuallyyouwilldobettertohaveaveragepricesandcompeteonquality
andservice.
Doesyourpricingstrategyfitwithwhatwasrevealedinyourcompetitiveanalysis?
Compareyourpriceswiththoseofthecompetition.Aretheyhigher,lower,thesame?
Why?
Howimportantispriceasacompetitivefactor?Doyourintendedcustomersreally
maketheirpurchasedecisionsmostlyonprice?
Whatwillbeyourcustomerserviceandcreditpolicies?
ProposedLocation
Probablyyoudonothaveapreciselocationpickedoutyet.Thisisthetimetothink
aboutwhatyouwantandneedinalocation.Manystartupsrunsuccessfullyfromhome
forawhile.
Youwilldescribeyourphysicalneedslater,intheOperationalPlansection.Here,
analyzeyourlocationcriteriaastheywillaffectyourcustomers.
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Isyourlocationimportanttoyourcustomers?Ifyes,how?
Ifcustomerscometoyourplaceofbusiness:
Isitconvenient?Parking?Interiorspaces?Notoutoftheway?
Isitconsistentwithyourimage?
Isitwhatcustomerswantandexpect?
Whereisthecompetitionlocated?Isitbetterforyoutobenearthem(likecardealersor
fastfoodrestaurants)ordistant(likeconveniencefoodstores)?
DistributionChannels
Howdoyousellyourproductsorservices?
Retail
Direct(mailorder,Web,catalog)
Wholesale
Yourownsalesforce
Agents
Independentrepresentatives
Bidoncontracts
Sales Forecast
Nowthatyouhavedescribedyourproducts,services,customers,markets,and
marketingplansindetail,itstimetoattachsomenumberstoyourplan.Useasales
forecastspreadsheettoprepareamonthbymonthprojection.Theforecastshouldbe
basedonyourhistoricalsales,themarketingstrategiesthatyouhavejustdescribed,
yourmarketresearch,andindustrydata,ifavailable.
Youmaywanttodotwoforecasts:1)abestguess,whichiswhatyoureallyexpect,
and2)aworstcaselowestimatethatyouareconfidentyoucanreachnomatterwhat
happens.
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Remembertokeepnotesonyourresearchandyourassumptionsasyoubuildthissales
forecastandallsubsequentspreadsheetsintheplan.Thisiscriticalifyouaregoingto
presentittofundingsources.
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VI.
OperationalPlan
Explainthedailyoperationofthebusiness,itslocation,equipment,people,processes,
andsurroundingenvironment.
Production
Howandwhereareyourproductsorservicesproduced?
Explainyourmethodsof:
Productiontechniquesandcosts
Qualitycontrol
Customerservice
Inventorycontrol
Productdevelopment
Location
Whatqualitiesdoyouneedinalocation?Describethetypeoflocationyoullhave.
Physicalrequirements:
Amountofspace
Typeofbuilding
Zoning
Powerandotherutilities
Access:
Isitimportantthatyourlocationbeconvenienttotransportationortosuppliers?
Doyouneedeasywalkinaccess?
Whatareyourrequirementsforparkingandproximitytofreeway,airports,railroads,
andshippingcenters?
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Includeadrawingorlayoutofyourproposedfacilityifitisimportant,asitmightbefor
amanufacturer.
Construction?Mostnewcompaniesshouldnotsinkcapitalintoconstruction,butifyou
areplanningtobuild,costsandspecificationswillbeabigpartofyourplan.
Cost:Estimateyouroccupationexpenses,includingrent,butalsoincluding
maintenance,utilities,insurance,andinitialremodelingcoststomakethespacesuit
yourneeds.Thesenumberswillbecomepartofyourfinancialplan.
Whatwillbeyourbusinesshours?
Legal Environment
Describethefollowing:
Licensingandbondingrequirements
Permits
Health,workplace,orenvironmentalregulations
Specialregulationscoveringyourindustryorprofession
Zoningorbuildingcoderequirements
Insurancecoverage
Trademarks,copyrights,orpatents(pending,existing,orpurchased)
Personnel
Numberofemployees
Typeoflabor(skilled,unskilled,andprofessional)
Whereandhowwillyoufindtherightemployees?
Qualityofexistingstaff
Paystructure
Trainingmethodsandrequirements
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Whodoeswhichtasks?
Doyouhaveschedulesandwrittenproceduresprepared?
Haveyoudraftedjobdescriptionsforemployees?Ifnot,taketimetowritesome.
Theyreallyhelpinternalcommunicationswithemployees.
Forcertainfunctions,willyouusecontractworkersinadditiontoemployees?
Inventory
Whatkindofinventorywillyoukeep:rawmaterials,supplies,finishedgoods?
Averagevalueinstock(i.e.,whatisyourinventoryinvestment)?
Rateofturnoverandhowthiscomparestotheindustryaverages?
Seasonalbuildups?
Leadtimeforordering?
Suppliers
Identifykeysuppliers:
Namesandaddresses
Typeandamountofinventoryfurnished
Creditanddeliverypolicies
Historyandreliability
Shouldyouhavemorethanonesupplierforcriticalitems(asabackup)?
Doyouexpectshortagesorshorttermdeliveryproblems?
Aresupplycostssteadyorfluctuating?Iffluctuating,howwouldyoudealwith
changingcosts?
Credit Policies
Doyouplantoselloncredit?
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Doyoureallyneedtoselloncredit?Isitcustomaryinyourindustryand
expectedbyyourclientele?
Ifyes,whatpolicieswillyouhaveaboutwhogetscreditandhowmuch?
Howwillyoucheckthecreditworthinessofnewapplicants?
Whattermswillyouofferyourcustomers;thatis,howmuchcreditandwhenis
paymentdue?
Willyouofferpromptpaymentdiscounts?(Hint:Dothisonlyifitisusualand
customaryinyourindustry.)
Doyouknowwhatitwillcostyoutoextendcredit?Haveyoubuiltthecostsinto
yourprices?
ManagingYourAccountsReceivable
Ifyoudoextendcredit,youshoulddoanagingatleastmonthlytotrackhowmuchof
yourmoneyistiedupincreditgiventocustomersandtoalertyoutoslowpayment
problems.Areceivablesaginglookslikethefollowingtable:
Total
Accounts
ReceivableAging
Current
30Days
60Days
90Days
Over90Days
Youwillneedapolicyfordealingwithslowpayingcustomers:
Whendoyoumakeaphonecall?
Whendoyousendaletter?
Whendoyougetyourattorneytothreaten?
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ManagingYourAccountsPayable
Youshouldalsoageyouraccountspayable,whatyouowetoyoursuppliers.Thishelps
youplanwhomtopayandwhen.Payingtooearlydepletesyourcash,butpayinglate
cancostyouvaluablediscountsandcandamageyourcredit.(Hint:Ifyouknowyou
willbelatemakingapayment,callthecreditorbeforetheduedate.)
Doyourproposedvendorsofferpromptpaymentdiscounts?
Apayablesaginglookslikethefollowingtable.
AccountsPayable
Aging
Total
Current
30Days
60Days
90Days
Over90Days
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VII. ManagementandOrganization
Whowillmanagethebusinessonadaytodaybasis?Whatexperiencedoesthatperson
bringtothebusiness?Whatspecialordistinctivecompetencies?Isthereaplanfor
continuationofthebusinessifthispersonislostorincapacitated?
Ifyoullhavemorethan10employees,createanorganizationalchartshowingthe
managementhierarchyandwhoisresponsibleforkeyfunctions.
Includepositiondescriptionsforkeyemployees.Ifyouareseekingloansorinvestors,
includeresumesofownersandkeyemployees.
Boardofdirectors
Managementadvisoryboard
Attorney
Accountant
Insuranceagent
Banker
Consultantorconsultants
Mentorsandkeyadvisors
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VIII. PersonalFinancialStatement
Includepersonalfinancialstatementsforeachownerandmajorstockholder,showing
assetsandliabilitiesheldoutsidethebusinessandpersonalnetworth.Ownerswill
oftenhavetodrawonpersonalassetstofinancethebusiness,andthesestatementswill
showwhatisavailable.Bankersandinvestorsusuallywantthisinformationaswell.
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IX.
StartupExpensesandCapitalization
Youwillhavemanystartupexpensesbeforeyouevenbeginoperatingyourbusiness.
Itsimportanttoestimatetheseexpensesaccuratelyandthentoplanwhereyouwillget
sufficientcapital.Thisisaresearchproject,andthemorethoroughyourresearch
efforts,thelesschancethatyouwillleaveoutimportantexpensesorunderestimate
them.
Evenwiththebestofresearch,however,openinganewbusinesshasawayofcosting
morethanyouanticipate.Therearetwowaystomakeallowancesforsurprise
expenses.Thefirstistoaddalittlepaddingtoeachiteminthebudget.Theproblem
withthatapproach,however,isthatitdestroystheaccuracyofyourcarefullywrought
plan.Thesecondapproachistoaddaseparatelineitem,calledcontingencies,to
accountfortheunforeseeable.Thisistheapproachwerecommend.
Talktootherswhohavestartedsimilarbusinessestogetagoodideaofhowmuchto
allowforcontingencies.Ifyoucannotgetgoodinformation,werecommendaruleof
thumbthatcontingenciesshouldequalatleast20percentofthetotalofallotherstart
upexpenses.
Explainyourresearchandhowyouarrivedatyourforecastsofexpenses.Givesources,
amounts,andtermsofproposedloans.Alsoexplainindetailhowmuchwillbe
contributedbyeachinvestorandwhatpercentownershipeachwillhave.
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X.
FinancialPlan
Thefinancialplanconsistsofa12monthprofitandlossprojection,afouryearprofit
andlossprojection(optional),acashflowprojection,aprojectedbalancesheet,anda
breakevencalculation.Togethertheyconstituteareasonableestimateofyour
companysfinancialfuture.Moreimportant,theprocessofthinkingthroughthe
financialplanwillimproveyourinsightintotheinnerfinancialworkingsofyour
company.
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aboutthemperhapscutexpenses,orperhapsnegotiatealoan.Butforemost,you
shouldntbetakenbysurprise.
Thereisnogreattricktopreparingit:Thecashflowprojectionisjustaforwardlookat
yourcheckingaccount.
Foreachitem,determinewhenyouactuallyexpecttoreceivecash(forsales)orwhen
youwillactuallyhavetowriteacheck(forexpenseitems).
Youshouldtrackessentialoperatingdata,whichisnotnecessarilypartofcashflowbut
allowsyoutotrackitemsthathaveaheavyimpactoncashflow,suchassalesand
inventorypurchases.
Youshouldalsotrackcashoutlayspriortoopeninginaprestartupcolumn.You
shouldhavealreadyresearchedthoseforyourstartupexpensesplan.
Yourcashflowwillshowyouwhetheryourworkingcapitalisadequate.Clearly,if
yourprojectedcashbalanceevergoesnegative,youwillneedmorestartupcapital.
Thisplanwillalsopredictjustwhenandhowmuchyouwillneedtoborrow.
Explainyourmajorassumptions,especiallythosethatmakethecashflowdifferfrom
theProfitandLossProjection.Forexample,ifyoumakeasaleinmonthone,whendo
youactuallycollectthecash?Whenyoubuyinventoryormaterials,doyoupayin
advance,upondelivery,ormuchlater?Howwillthisaffectcashflow?
Aresomeexpensespayableinadvance?When?
Arethereirregularexpenses,suchasquarterlytaxpayments,maintenanceandrepairs,
orseasonalinventorybuildup,thatshouldbebudgeted?
Loanpayments,equipmentpurchases,andownersdrawsusuallydonotshowon
profitandlossstatementsbutdefinitelydotakecashout.Besuretoincludethem.
Andofcourse,depreciationdoesnotappearinthecashflowatallbecauseyounever
writeacheckforit.
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heldbythecompany(assets),andwhatitsdebtsare(liabilities).Whenliabilitiesare
subtractedfromassets,theremainderisownersequity.
Useastartupexpensesandcapitalizationspreadsheetasaguidetopreparingabalance
sheetasofopeningday.Thendetailhowyoucalculatedtheaccountbalancesonyour
openingdaybalancesheet.
Optional:Somepeoplewanttoaddaprojectedbalancesheetshowingtheestimated
financialpositionofthecompanyattheendofthefirstyear.Thisisespeciallyuseful
whensellingyourproposaltoinvestors.
Break-Even Analysis
Abreakevenanalysispredictsthesalesvolume,atagivenprice,requiredtorecover
totalcosts.Inotherwords,itsthesaleslevelthatisthedividinglinebetweenoperating
atalossandoperatingataprofit.
Expressedasaformula,breakevenis:
BreakEvenSales= FixedCosts
1VariableCosts
(Wherefixedcostsareexpressedindollars,butvariablecostsareexpressedasapercent
oftotalsales.)
Includeallassumptionsuponwhichyourbreakevencalculationisbased.
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XI.
Appendices
Includedetailsandstudiesusedinyourbusinessplan;forexample:
Brochuresandadvertisingmaterials
Industrystudies
Blueprintsandplans
Mapsandphotosoflocation
Magazineorotherarticles
Detailedlistsofequipmentownedortobepurchased
Copiesofleasesandcontracts
Lettersofsupportfromfuturecustomers
Anyothermaterialsneededtosupporttheassumptionsinthisplan
Marketresearchstudies
Listofassetsavailableascollateralforaloan
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XII. RefiningthePlan
Thegenericbusinessplanpresentedaboveshouldbemodifiedtosuityourspecifictype
ofbusinessandtheaudienceforwhichtheplaniswritten.
Bankerswantassuranceoforderlyrepayment.Ifyouintendusingthisplanto
presenttolenders,include:
o Amountofloan
o Howthefundswillbeused
o Whatthiswillaccomplishhowwillitmakethebusinessstronger?
o Requestedrepaymentterms(numberofyearstorepay).Youwill
probablynothavemuchnegotiatingroomoninterestratebutmaybeable
tonegotiatealongerrepaymentterm,whichwillhelpcashflow.
o Collateraloffered,andalistofallexistingliensagainstcollateral
ForInvestors
Investorshaveadifferentperspective.Theyarelookingfordramaticgrowth,and
theyexpecttoshareintherewards:
o Fundsneededshortterm
o Fundsneededintwotofiveyears
o Howthecompanywillusethefunds,andwhatthiswillaccomplishfor
growth.
o Estimatedreturnoninvestment
o Exitstrategyforinvestors(buyback,sale,orIPO)
o Percentofownershipthatyouwillgiveuptoinvestors
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o Milestonesorconditionsthatyouwillaccept
o Financialreportingtobeprovided
o Involvementofinvestorsontheboardorinmanagement
Plannedproductionlevels
Anticipatedlevelsofdirectproductioncostsandindirect(overhead)costshow
dothesecomparetoindustryaverages(ifavailable)?
Pricesperproductline
Grossprofitmargin,overallandforeachproductline
Production/capacitylimitsofplannedphysicalplant
Production/capacitylimitsofequipment
Purchasingandinventorymanagementprocedures
Newproductsunderdevelopmentoranticipatedtocomeonlineafterstartup
ServiceBusinesses
Servicebusinessessellintangibleproducts.Theyareusuallymoreflexiblethan
othertypesofbusinesses,buttheyalsohavehigherlaborcostsandgenerally
verylittleinfixedassets.
Whatarethekeycompetitivefactorsinthisindustry?
Yourprices
Methodsusedtosetprices
Systemofproductionmanagement
Qualitycontrolprocedures.Standardoracceptedindustryqualitystandards.
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Howwillyoumeasurelaborproductivity?
Percentofworksubcontractedtootherfirms.Willyoumakeaprofiton
subcontracting?
Credit,payment,andcollectionspoliciesandprocedures
Strategyforkeepingclientbase
HighTechnologyCompanies
Economicoutlookfortheindustry
Willthecompanyhaveinformationsystemsinplacetomanagerapidlychanging
prices,costs,andmarkets?
Willyoubeonthecuttingedgewithyourproductsandservices?
Whatisthestatusofresearchanddevelopment?Andwhatisrequiredto:
o Bringproduct/servicetomarket?
o Keepthecompanycompetitive?
Howdoesthecompany:
o Protectintellectualproperty?
o Avoidtechnologicalobsolescence?
o Supplynecessarycapital?
o Retainkeypersonnel?
Hightechcompaniessometimeshavetooperateforalongtimewithoutprofitsand
sometimesevenwithoutsales.Ifthisfitsyoursituation,abankerprobablywillnot
wanttolendtoyou.Venturecapitalistsmayinvest,butyourstorymustbeverygood.
Youmustdolongertermfinancialforecaststoshowwhenprofittakeoffisexpectedto
occur.Andyourassumptionsmustbewelldocumentedandwellargued.
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RetailBusiness
Companyimage
Pricing:
o Explainmarkuppolicies.
o Pricesshouldbeprofitable,competitive,andinaccordancewithcompany
image.
Inventory:
o Selectionandpriceshouldbeconsistentwithcompanyimage.
o Inventorylevel:Findindustryaveragenumbersforannualinventory
turnoverrate(availableinRMAbook).Multiplyyourinitialinventory
investmentbytheaverageturnoverrate.Theresultshouldbeatleast
equaltoyourprojectedfirstyearscostofgoodssold.Ifitisnot,youmay
nothaveenoughbudgetedforstartupinventory.
Customerservicepolicies:Theseshouldbecompetitiveandinaccordwith
companyimage.
Location:Doesitgivetheexposurethatyouneed?Isitconvenientfor
customers?Isitconsistentwithcompanyimage?
Promotion:Methodsused,cost.Doesitprojectaconsistentcompanyimage?
Credit:Doyouextendcredittocustomers?Ifyes,doyoureallyneedto,anddo
youfactorthecostintoprices?